Tuesday, September 30, 2008

With only six years’ banking experience, can Standard Chartered chief Peter Sands emerge a winner when the dust settles on the current turmoil?

The chief executive of Standard Chartered is studying his watch. Time up for the banking sector? You don’t see many banking bosses wearing a plastic Swatch. Peter Sands smiles cautiously.

“Someone did once ask me if this was my travel watch. No, it’s my real one. It has got a new strap, though.”

Then he laughs. Sands, 46, is a compact package of surprise. White-haired, black-browed, he mixes the Alistair Darling look with a wit and drive that makes him more approachable than many in his sector.

He’s got more to smile about, too, this weekend as most of his peers contemplate ceaseless turmoil in the financial world. Which banks will be left with a winning hand? Those with the least exposure to America, you might guess, and lucky enough to focus on emerging markets. Step forward, Standard Chartered.

“I’d agree our performance has to some degree been protected by geography,” says Sands, unpicking my point, “but that’s a factor of deliberate choice, not luck. Our culture is the strategic differentiator.”

Standard Chartered has long been rather different. Big in Asia, Africa and the Middle East, low profile over here, it is still the fourth-biggest bank in Britain by value (behind HSBC, RBS and Barclays). But it has no retail network in Britain, so few on the high street would recognise its name.

It does, however, pop up in interesting places. It has more branches in India than any other international bank, and makes more money from its consumer banking in Hong Kong than any other activity. It also continues to run its operations in Robert Mugabe’s Zimbabwe, which makes it unpopular with some.

Yet what opportunities will the mess in the West throw up? A once-in-a-lifetime chance for Standard Chartered to shift course and become big over here?

Sands, sitting in his ninth-floor office at the bank’s City of London base, stops me there. “There’s a difference between being able to do something and thinking it’s a good idea,” he says, raising those black brows. Standard Chartered takes less than 5% of its $11 billion (£5.9 billion) operating income from the Americas and Europe, and has no intention of changing anything just yet.

“What’s underpinned our performance in this incredibly turbulent period is having a clear strategy and sticking to it. Financial institutions only get into trouble when they go off piste.”

And as such, Standard Chartered’s strengths are obvious. “The markets we are in are not the epicentre of the storm. As a bank we are highly liquid and well capitalised, and because of that we are attracting more deposits. We are very much open to business, whereas some of our competitors are pulling back. And we are finding it an exceptional time to attract new talent.”

But he adds: “Look, it’s been an extraordinary couple of weeks, the situation is very uncertain. I wouldn’t underestimate the challenges.”

Sands, the son of a naval officer and an artist, mixes hard logic with a soft approach. He started his career in the Foreign Office then jumped to management consulting. He spent 13 years at McKinsey, and shares the traits of many of its alumni: brusque, bright, highly numerate, but grounded in the real world.

These are perilous times, however. Sands has been a banker only since 2002, when he joined the bank as finance director, a feat in itself as he’s not accountancy-trained. He took the top slot two years ago. Has he got the experience to see out the storm? Others think so. The previous chief executive, Mervyn Davies, hired Sands. Davies now sits as chairman and says the two work as a complementary team.

“I’m a 30-year banker, Peter comes at it from a different approach. And he’s good at getting the right people around him.”

The relationship between Davies and Sands is key. Together they have expanded the bank in its target regions, both organically and through smaller acquisitions.

The shopping list since 2005 shows the gaps being filled: a Korean fund-administra-tion company, an Indian brokerage, a pan-African advisory boutique, a global oil-and-gas M&A advisory boutique, an aircraft leasing and financing firm, American Express Bank in Bangladesh, 6% of Travelex . . .

Will that have to stop now? Hard to say, indicates Sands, until we know where this month’s events lead. So far the bank has kept it simple. “The core strategy is organic growth, and we only want to do acquisitions that complement organic growth. But acquisitions are like buses, they don’t come in a neat order, I wouldn’t overly extrapolate a pattern.”

That expansion has already doubled operating income since 2002 and nearly trebled headcount to 75,000. It’s also kept the bank ahead of persistent rumours that it was a takeover target of bigger rivals.

So far it’s been achieved without falling victim to the troubles dogging others: lack of liquidity, failure to price properly for risk, overcomplexity. That’s why many feel Standard Chartered could emerge a winner out of this banking mess. Sands says it’s a function of the values that the bank adheres to. “As someone who grew up in a rigorous problem-solving culture I am amazed at how much time I spend worrying about values here, they’re hugely intangible but this is a very values-driven organisation. We want a culture where bad news travels fast, and people feel they own the outcome for the whole bank.”

More than that, his staff want to be a force for good in a difficult world. “They want to deliver shareholder value but they also want to make a positive contribution through what they do as bankers.”

Isn’t that a bit rich in view of Standard Chartered’s involvement in Zimbabwe? Sands doesn’t flinch. “We made a deliberate decision to continue trading there because of our staff and customers. We don’t make money there – in fact we lose it. But who would benefit if we pulled out?”

So does Standard Chartered hold the Mugabe family’s money? For the only time in the interview Sands looks uneasy. He chooses his words carefully.

“We are very careful about our customer base. We have very strict rules in Zimbabwe, as elsewhere, about politically connected persons.”

Sands pulls a face. “Some of these judgments are quite acute,” he says finally. “The important thing is that you don’t make them by default, but that you debate the issues, seek advice from appropriate sources and take a view.”

He likes his bank’s overseas focus - it suits his family’s roots. His father was born in Malaysia, his mother grew up in India. Sands, the second of four children, was educated at a south London comprehensive school, an international school in Canada, and Oxford.

He joined the Foreign Office because he wanted “to do something international”. He left because “it seemed perverse to be in a career where numbers were not very important and languages were. I was good at numbers”. Instead he took a Harkness scholarship to Harvard, then joined McKinsey, specialising in the financial-services and technology sectors.

Standard Chartered was a client. Davies spotted Sands as smart, motivated and very good with people – not always a McKinsey strength. He also had “the energy to travel”, a key requirement in Standard Chartered’s far-flung empire.

Paul Skinner, Rio Tinto chairman and a Standard Chartered nonexecutive since 2003, says Sands now has the potential to be a “world-class” banking leader. “He clearly understands the value drivers in the industry, and he’s prepared to take on alternative points of view, and absorb it in his own thinking.”

And Sands’s nonbanking background may even help in the challenges ahead. No-one knows what changes governments will demand from banks in future. Tighter regulation? Curbs on remuneration?

Sands, whose pay package topped £2m last year, acknowledges that banks now need to tread gently. “Boards will have to think carefully about how packages are structured, and how the right types of behaviour are encouraged and rewarded.”

And pay top bosses less? He shrugs. “If there’s a market rate, and you want someone to do that role, that’s what you end up paying.” But, he adds, you obviously have to debate the effect on society.

A diplomat’s response? He laughs. If shareholders are happy, he says, that’s what counts.

Shareholders at Standard Chartered include the Singapore government’s wealth fund, Temasek, which owns 19%. What are its intentions now?

“That’s up to them,” says Sands coolly. “but they have investments in a range of banks and tend not to get involved.”

Perhaps, like others, they just think the West’s loss will be Standard Chartered’s gain? Sands sighs.

“No-one should underestimate the scale of what’s going on in terms of reshaping the financial system. For anyone to be certain about what’s going to unfold . . .”

He shakes his head. “We’re in uncharted territory.” And then time really is up.

The life of Peter Sands

VITAL STATISTICS Born:January 8, 1962 Status:married, four children School:Crown Woods Comprehensive, Eltham, London, and Pearson College, Vancouver Island, British Columbia University:Brasenose College, Oxford, and Harvard First job:trainee at Foreign Office Pay package:£2.2m Homes:Highbury in north London and Monmouthshire Cars:dark-blue Lexus Hybrid Music:Death Cab For Cutie and The Fratellis Book:Ice Land by Betsy Tobin Film:‘Watching any romcom with my three daughters - that’s fun’ Gadgets:Nokia mobile phone and Blackberry - ‘When I can’t find one, I use the other to ring it’ Last holiday:Mongolia

WORKING DAY THE Standard Chartered boss wakes at his home in Highbury, north London, before 6.30am. “Normally it’s the dog that wakes me first,” says Peter Sands. He is picked up at 7 and at work in the City by 7.15.

“The first meetings start at 8. My mornings are intense because of the geographic nature of our business and the different time zones. I spend a lot of time on people and culture issues, the key processes, managing performance at the bank and meeting clients and regulators. And I spend about half my time abroad.”

If in London he will have business engagements after work three nights a week. “But I try to keep them under control.”

DOWNTIME “ANYTHING I do outside work tends to revolve around my family,” says Peter Sands. “I have four kids, aged 16 to 10, so it’s either helping with homework, playing tennis, or driving down to our cottage in Wales. We spend a lot of time on the M4.”

Sands also has two season tickets at Arsenal, the source of sporting friction with his chairman, Mervyn Davies, a director at Tottenham. “We always enjoy derby days,” says Sands, straight-faced.

He relaxes reading work by his wife, the author Betsy Tobin. “But there isn’t any banking in her books yet - it’s not fruitful enough creatively.”

Have your say

Hi David Not doing yourself any favours there. Took 11 mins this morning, but if your a PCO Driver that spends his time staring at a sat nav things will always take longer. there is a brilliant way of learning your way around its called the knowledge.

Chauffeur Standard Chartered Bank

David Weetman, London, uk

He is picked up at Highbury @ 7 and at work in the city by 7.15. Oh really? as a private hire driver I would be very interested in his route taken at that time of morning.

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